Africa: Trade Deception

Editor's Note

Initial news stories from world trade talks in Geneva heralded rich
country commitments to cut agricultural subsidies, celebrating the
July 31 framework agreement as a victory for rich and poor
countries alike. For those who followed the later dissection of the
fine print, however, it quickly became apparent that the commitment
was largely a "shell game," as James Flanagan put it in the Los
Angeles Times (Aug. 15, 2004).

"The real negotiations will begin in September," commented
Senegalese minister of commerce Ousmane Ngom, speaking for African
cotton-producing countries. They won wording saying that WTO
members "will work to achieve ambitious results expeditiously" on
the issue, with a sub-committee to address cotton within the
broader agricultural talks. But the U.S. is maintaining its
challenge to the June WTO ruling that U.S. cotton subsidies are
illegal, and the African demand to put cotton on a separate fasttrack
negotiation has been set aside.

More generally, the agreement by rich countries to reduce
agricultural subsidies by 20% turned out to refer to reduction of
theoretical ceilings rather than of present subsidies, And, as U.S.
officials quickly made clear to farm state supporters, it would not
actually apply to most U.S. subsidies under the current farm bill.
The International Centre for Trade and Sustainable Development
noted that "one thing is already certain; it will be many years,
more likely more than a decade, before [the agreement] will make a
concrete difference on the ground."

This issue of AfricaFocus Bulletin contains an analysis of the July
agreement from Focus on the Global South, concluding that the
developed countries successfully used a divide-and-rule strategy to
outmaneuver the developing country front that had emerged at
Cancun. Significantly, the "five interested parties" that were key
to the negotiations - U.S., EU, Australia, India, and Brazil -
included no African country.

G20 Leaders Succumb to Divide-and-Rule Tactics:
The Story behind Washington's Triumph in Geneva

*Executive Director and Research Associate, respectively, of the
Bangkok-based Focus on the Global South

The July Framework Document [agreed by the World Trade
Organization] is a major triumph for the big trade superpowers,
particularly the United States. As for the developing world, the
situation is more complex, with most countries losing but some
claiming that they have made gains. Among the few claiming to be in
the win column are Brazil and India, which are acknowledged as the
leaders of the G20 [a coalition of developing countries that has
played a significant role in trade negotiations beginning with last
year's Cancun summit] and two of the Five Interested Parties (FIPS)
[along with the U.S., EU, and Australia] that played the leading
role in drafting the agriculture text.

Attention needs to be paid to the dynamics of the July framework
negotiations since they were a departure from traditional
North-South trade negotiations and may set patterns for things to
come.

General Council Supplants the Ministerial

Institutionally, among the innovations is that the General Council
has now become de facto the supreme institution for WTO
decision-making. What the July meeting came up with was effectively
a ministerial declaration without a ministerial meeting. Two
ministerial collapses--Seattle and Cancun--underlined to the WTO
secretariat and the trade superpowers the unwieldiness of the
ministerial as an arena for decision-making. It attracted NGOs and
popular protests. It drew ministers, many of whom were not
professional negotiators but political people determined to stand
up for their country's interests. It brought the press in large
numbers, thus making decision-making more transparent despite the
wishes of negotiators accustomed to exclusive "green rooms."

Only some 40 trade ministers were present in Geneva for the July GC
meeting, with many representatives of countries that played a key
role at the Cancun ministerial, such as Kenya and Nigeria, absent.
Obviously, with some 100 ministers of WTO member countries absent,
a great many governments failed to fully grasp the significance of
the meeting.

As for global civil society, which had played such a critical role
in the outcome in Cancun, it was, for the most part, complacent,
failing to appreciate how quickly the trading powers could rebound
from their state of disarray. Very few NGOs had people in Geneva
during the critical days in July.

Dealing with the G20

Yet, this was not simply the old-style manipulative behavior of the
trade superpowers and the WTO secretariat of the pre-Cancun period.
The post-Cancun situation made this impossible. Cancun marked the
emergence of the G20 as a key player in trade negotiations. As
Ambassador Clodualdo Huguenuy of Brazil put it during the debate at
the World Social Forum in Mumbai last January, "The G20 broke the
monopoly over trade negotiations by the EU and the US."

The US, however, failed to appreciate the change situation
immediately. Coming out of the Cancun summit, US Trade
Representative Robert Zoellick signalled a more aggressive, more
unilateralist approach in trade negotiations when he said that the
US would thereafter put its emphasis on concluding bilateral
agreements with "can do" countries, implying that it would expend
less effort in negotiations within the WTO. Washington also
launched a frontal assault on the G20, successfully detaching El
Salvador, Colombia, Peru, Costa Rica, and Guatemala from the body
in a few weeks' time.

As for other developing countries, the G20 was a phenomenon that
was received positively. Yet there were apprehensions among them
that the most influential members of the G20 were agro-exporters
like Brazil and that the main focus of the group was ending the EU
and US' massive subsidy systems and bringing down tariff barriers
to market access in these prosperous markets. Many countries,
including Indonesia, were worried that the G20 governments were
much less concerned with protecting developing country markets and
smallholder agriculture from low-priced imports. Hence, the G33
[coalition to address these issues] continued to put forward
proposals for protected "special products" and "special safeguard
mechanisms."

Other countries felt the G20 focus on agriculture was inadequate as
a strategy for defending developing country interests. This led to
the formation of the G90 (composed of the Africa Group, ACP
[African Caribbean and Pacificcountries] and the Least Developed
Countries) which united around the effort to block the "New Issues"
of investment, government procurement, competition and trade
facilitation from coming under the jurisdiction of the WTO.

Nevertheless, the G20's formation did electrify the ranks of
developing countries, and many governments were inspired by
Brazilian Foreign Minister Celso Amorim's promise in his Cancun
speech that the aim of the G 20 was to "bring it [the world trading
system] closer to the needs and aspirations of those who have been
at its margins--indeed the vast majority--those who have not had
the chance to reap the fruit of their toils. It is high time to
change this reality.''

By the spring of 2004, however, Washington's dual strategy --
pursuing bilateral agreements and destroying the G20--was running
into trouble. The Free Trade Area of the Americas (FTAA) that it
wanted failed to materialize in the ministerial summit in Miami in
November 2003, and it also began to realize that bilateral
agreements could complement but never substitute for a
comprehensive, multilateral free trade framework to promote
corporate trade interests. At the same time, the G20, despite the
initial defections, held firm.

Shifting Gear

To get the WTO restarted, Washington, working closely with
Brussels, shifted gears. Instead of trying to destroy or undermine
the G20, they moved to make its leaders, Brazil and India, a
central part of the negotiations in agriculture, which was the key
obstacle to any further moves at liberalization. Thus was formed in
early April the informal grouping called the Five Interested
Parties (FIPS), composed of the US, EU, Australia, Brazil, and
India. It was in close consultation with this grouping that WTO
Agriculture Committee Chairman Tim Groser produced the proposed
agriculture text of the July Framework.

A shift in strategy was also evident towards other countries and
formations. In the spring, USTR Zoellick began visiting a number of
strategic developing countries. Instead of spurning invitations to
the G90 meeting in Mauritus in mid-July, the EU and the US sent
high level delegates, including Zoellick. There, confrontational
language gave way to rhetorical efforts to get the developing
countries not only to come to a compromise on agriculture but also
to get talks moving on bringing down non-agricultural tariffs,
starting talks on trade facilitation, and getting the negotiations
on services underway. But perhaps the strongest message that the
developing countries heard from the trade superpowers was this was
the last chance to get the multilateral system moving -- the
implication being that they would be held responsible if the late
July General Council talks did not get off the ground.

The US-EU drive to restart the WTO succeeded brilliantly. The US
and the EU were the main beneficiaries of the agreement to cut
non-agricultural tariffs, with the highest tariff rates being
subjected to the deepest cuts; indeed, Zoellick went back to the US
trumpeting the claim that the accord on NAMA (Non-agricultural
Market Access) was a massive victory for US corporations since it
was but the beginning of a process that would reduce industrial and
manufacturing tariffs to zero. Both the EU and the US scored a
victory by getting the developing countries to agree to begin talks
on trade facilitation, one of the "new issues" that the developing
countries rejected in Cancun. But it was the US that scored the
biggest gain, getting as it did, in addition to the foregoing, an
expanded "Blue Box" in which to house a considerable portion of the
subsidies to its farmers legislated under the US Farm Bill of 2002.

Part of Washington's success stemmed from a wily negotiating
strategy. For instance, to get its new expanded Blue Box,
Washington distracted the developing countries attention by putting
forward its demand that they reduce their de minimis domestic
supports, that is, the allowable rate of subsidization of their
production. Thrown on the defensive, these countries spent much
energy justifying their subsidies, so that they were only too
relieved when the US stepped back to compromise on the issue in
return for their agreeing to the expansion of the Blue Box.
Similarly, just before the General Council meeting, the EU suddenly
brought in the category of "sensitive products" to protect some
20-40 per cent of its products from significant tariff cuts.
Worried that the EU might put blocks to their demand for protecting
products essential to their food security, the developing country
negotiators acquiesced.

Neutralizing Brazil and India

But the key to the victorious US strategy was bringing Brazil and
India into the core group of the negotiations, then acceding to
these countries' core demands in order to detach them from the rest
of the developing countries. India's key concern was to avoid the
so-called "Swiss Formula" for cutting tariffs that would require it
to bring down its agricultural tariffs substantially, something on
which it saw eye to eye with the European Union. According to one
developing country negotiator, India's main focus for the General
Council was protecting its tariffs and it was not going to push
hard on the issue of eliminating agricultural subsidies so as not
to endanger the EU's support for its position on tariffs. (The
Indian government's position on subsidies had been watered down by
its informal alliance with the EU on the tariff issue after the
Doha Ministerial before the EU abandoned the Indians to align
themselves to a common position with the US in the period leading
up to Cancun.) Both the EU and India were comfortable with a
"Uruguay Round" approach to tariff cuts as they regarded their
average tariff level as high enough for them to stomach another
round of cuts. There were developing countries, however, with much
lower tariff averages, for which even a Uruguay Round approach
would be too drastic, for example Honduras, Sri Lanka, Indonesia.

On the other hand, removing agricultural subsidies was Brazil's
concern, and here it got its way. The final text affirmed the
phase-out of export subsidies as well as certain categories of
export credits. The big winner with the phase-out of subsidies is
said to be Brazil, with some estimates placing its gains as some
$10 billion. According to Amorim, the July decision marked the
"beginning of the end" of export subsidies. Yet, the Brazilian
"gains" are not secure unless locked in by the modalities of the
negotiations. A specific end-date for the elimination of export
subsidies will only be clinched in the next phase of discussions.
Moreover, even when elimination has supposedly taken place, the EU
has after all been known to replace export subsidies with indirect
export subsidies by way of direct payments to farmers under the
Green Box. This is also the intention of the current Common
Agricultural Policy (CAP) reform. Furthermore, the framework leaves
untouched the Green Box, which houses up to 70 per cent of US'
total subsidies. Even the most optimistic analysts cannot say for
certain that overall levels of support from the two agricultural
giants will be brought down. In fact, it is predicted that subsidy
levels will be maintained if not increased.

Nevertheless, for now, Brazilian agribusiness is very happy.
Indeed, it was the pressure of Brazilian agribusiness that
allegedly forced Celso Amorim to hang-on to the subsidy issue at
the expense of a strong defense of developing country interests in
other areas. Having gained nothing from failed negotiations on the
FTAA and an EU-Mercosur trade pact, Brazilian agro-exporters were
hungry for a successful WTO agreement that would enable them to
hike their exports to the EU and US.

Among those that were left disadvantaged from India and Brazil
placing their specific interests in command were:

the majority of developing countries whose markets will continue
to be flooded by dumped products from the US and EU. For the South
as a whole, the opportunity to correct the distortions in
agriculture trade legitimized in the Uruguay Round has been lost

the African cotton-producing countries which failed to get
negotiations on US cotton subsidies put on a fast-track
independent of the agriculture negotiations, or even a commitment
that all cotton subsidies will be eliminated;

the Group of 33, which was left with nothing more than a vague
commitment that their demand for "special products" and the
"special safeguards mechanism" and in particular, the coverage of
products under such a mechanism, would be a subject of
negotiations;

most developing countries, which had rightfully opposed the NAMA
text (on market access of non-agricultural products) as a
prescription for their deindustrialization. Indeed, the US scored
a big win on NAMA for the text is a detailed agenda for the
radical liberalization that transnational corporations have long
wanted. As the US National Association of Manufacturers saw it,
"This is a huge accomplishment, and a big win for the WTO, the
United States, and the world economy. The really big
accomplishment for industrial negotiations is that all countries
have accepted the principle of big tariff cuts and sectoral tariff
elimination."

most developing countries, which have now agreed to speed up
their offers of services for liberalization.

Dilemma

It was not that lndia and Brazil were not sensitive to the demands
of other developing countries. In fact, they were given high marks
for consulting the different developing country groupings. It was
simply that by becoming central actors in the elaboration of the
proposed framework, they had painted themselves into an impossible
situation. And the more meeting their own interests began to
diverge from a strategy of promoting the interests of the bulk of
the developing countries, the more they trumpeted the claim that
the July Framework Document was a victory for the South. It is
testimony to the prestige of India and Brazil among other countries
in the South that up till today, many developing countries do not
realize how badly they lost in Geneva.

Lessons Learned

The trade superpowers learned from the debacle in Cancun. The shift
from a confrontational strategy to one of cooptation and subtle
divide-and-rule was able to rip apart the superficial "Third World
unity" that came out of Cancun. The centerpiece of the strategy was
to bring in the leaders of the G20, India and Brazil, into the
center of the negotiations and play to their specific interests.
They fell for the trap. Moreover, having become central players as
members of the exclusive Five Interested Parties, their ability to
repudiate large parts of a text that they had been consulted on
prior to its release to the General Council was limited. That would
have invited the onus of being responsible for the "collapse" of
the Doha Round and the multilateral trading system.

During and after Cancun, the G20 was seen in some circles as
representing a major power shift in the global trading order. Some
even saw the G20 as the dynamo for a reinvigorated "New
International Economic Order." The reality is that the G20, and in
particular Brazil and India, have been accommodated into the ranks
of the key global trading powers, but it is increasingly becoming
clear that the price for this has been their diluting the strength
of the negotiating position of the South.

More than ever, the South needs leadership, one that is willing to
take risks for the whole and rejects the temptation to settle for
small and maybe illusory gains for one's country. Many had expected
the leaders of the G20 to fill this role. In the first decisive
post-Cancun encounter, the latter have not lived up to
expectations.

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